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TMI Blog2017 (2) TMI 1317X X X X Extracts X X X X X X X X Extracts X X X X ..... d the facts of the case are that one M/s. Minda HUF Ltd. (herein referred to as HUF) was engaged in the manufacture of automobile locksets and was availing the benefit of Cenvat credit of duty paid on various inputs and capital goods. Inquiries were conducted and it was found that some of the firms, including the present applicants, were not having the facility to manufacture the inputs and were neither registered with Central Excise Department. They were only issuing invoices, without supply of goods or inputs, on the basis of which M/s. HUF was availing the credit. It is seen that M/s. HUF along with other three co-noticees approached the Settlement Commission who vide their order FO No. 555/CE/07(PB), dated 5-7-2007 appropriated the entire amount of Rs. 2,20,00,975/- paid by M/s. HUF along with payment of interest at the rate of 10%. Further, the said M/s. HUF along with the other co-appellants were granted full immunity from fine, penalty and prosecution. 3. The present appellants during the course of adjudication, pleaded before the Commissioner that inasmuch main appellant has not been imposed with any penalty and the other co-noticee placed upon the same platform, have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of cases under KVSS including in the case of Onkar S. Kanwar do not become entirely irrelevant. (b) The question as to who played the main role is irrelevant for the reason that once the case is settled by the Settlement Commission, it is settled in its entirety and such a case then cannot be adjudicated qua other co-noticees. (c) The case against all co-noticees comes to an end. once the order of settlement is passed in respect of the person entitled to file an application before the Settlement Commission and therefore, penalty imposed upon the appellants cannot be sustained and is set aside. (d) The order proposed by the Id. Member (Judicial) is endorsed. " 5. It is seen that the said orders were subsequently followed by the Tribunal, in the case of Pearl Polymers Ltd. v. CCE, Raigad [2008 (226) E.L.T. 566 (Tri-Mum)]. It was held that when the case is settled by the Settlement Commission in respect of main appellants, case against co-noticee also comes to an end. Penalty cannot be imposed upon the co-noticee for availment of ineligible credit especially when entire duty liability was deposited b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and further observed that the CESTAT as a judicial body, must realize the importance of doctrine of precedent as in our legal system. Deference to judgements of the Supreme Court is a matter of constitutional principle. Equally unless Coordinate Benches of the Tribunal have due deference and regard for decisions rendered by the Tribunal, the elements of certainty and consistency in the judicial process which lie at the heart of judicial functioning would be seriously disrupted. 9. Before we part with the matter, we would like to observe that the stay order passed by the Tribunal directing the appellant to deposit 25% of the penalty was challenged before Delhi High Court and as reported in 2012 (278) E.L.T. 303 (Del.) by Mukesh Garg wherein the Hon'ble High Court has taken a serious note of the said directions and further taken into account the Tribunal's decision in the case of S.K. Colombowala, Shitala Prasad Sharma and Pearl Polymers and prima facie held that appellants have a case in their favour and they were entitled to waiver of pre-deposit. Though we are aware that observations made at the time of interim stage cannot be held to be binding but admittedly the observat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppropriated the entire amount of Rs. 2,20,00,975/- paid by M/s. HUF along with payment of interest at the rate of 10%. Further, the said M/s. HUF along with the other co-appellants were granted full immunity from fine, penalty and prosecution. Para 3. The present appellants during the course of adjudication, pleaded before the Commissioner that inasmuch main appellant has not been imposed with any penalty and the other co-noticee placed upon the same platform, have also been granted immunity from fine and prosecution, the imposition of penalty upon them would be neither justified nor warranted. For the above proposition, they relied upon the Tribunal's decisions in the case of S.K. Colombowala v. CCE [2007 (220) E.L.T. 492 (Tri.)]. They also referred to various decision of the Tribunal wherein penalties imposed upon the co-noticee were set aside, where the dispute in respect of main noticee was settled by the Settlement Commission. However, Commissioner did not accept the above contention of the appellant and imposed penalties, as detailed above." 13. Four appellants namely Ms. Mamta Garg, (Proprietor of M/s. SRG Machines) w/o Shri Mukesh Garg, Nataji Subhas Nagar, Delh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Noticee no. 5 to Noticee no. 20 were indulging in passing of the Cenvat credit issuing fake and bogus invoices enabling MHL to illegally enrich themselves at the cost of the exchequer by the extent of Cenvat credit taken on the strength of such bogus/fake invoices. They colluded and abetted with MHL to evade payment of Central Excise duty deliberately and defrauded Government passing on illegal Cenvat credit without manufacturing and supplying any goods mentioned in the fake invoices. 16. On the above factual background and on perusal of draft order and interpretation adopted by learned Judicial Member following Tribunal's judgement in the case of S.K. Colombowala v. CCE (supra), to grant immunity to the racketeers of fraud, I am not in agreement with such proposal. Reliance was also placed by the learned Judicial Member on Supreme Court Judgment in the case of Onkar S. Kanwar [2002 (145) E.L.T. 266 (S.C.)]. Tribunal has no advantage reading the ratio laid down by Apex Court in the case of Natarajan v. State by Inspector of Poilce, SPE, CBI, ACB, Chennai - 2008 (226) E.L.T. 679 (S.C.) where it was held that immunity granted by the Court is confined to the party who carried ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Vellapally, on the other hand, submitted that only one show cause notice had been issued. He submitted that in the same show cause notice the Company was called upon to show cause why excise duty and penalty be not levied and the Directors/Officers were also called upon to show cause why penalty be not levied on them. He submitted that Section 91 of the Kar Vivad Samadhan Scheme makes it clear that on payment being made and a certificate being granted, immunity is granted against prosecution for any offence and from imposition of penalty. He submitted that once the Company settled under the said scheme, there was immunity in respect of the matter for which the show cause notice was issued. He submitted that penalty was sought to be imposed on the Director/Officers for the same matter in respect of which the show cause noticee had been issued on the Company. He submitted that once the Company got immunity in respect of that matter, nothing survived even against the Director/Officers. 12. We are unable to accept this submission. Under the Kar Vivad Samadhan Scheme there is no adjudication on the subject-matter of the demand notice or show cause notice. There is a settlement o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vee Kay Enterprises v. C.C.E. reported in 2011 (266) E.L.T. 436 (P & H) held that penalty under Rule 26 ibid is imposable on Dealers of Cenvatable goods when only invoices are raised to pass on Cenvat Credit while no raw materials are supplied by the Dealers. The relevant para 10 of the judgment is reproduced for appreciation : 10. In spite of non-applicability of Rule 26(2), penalty could be levied as the appellant was concerned in selling or dealing with the goods which were liable to confiscation inasmuch as the appellant claimed to have sold the goods in respect of which the cenvat credit was taken. In such a case, Rule 25(l)(d) and 26(1) are also applicable. The person who purports to sell goods cannot say that he was not a person concerned with the selling of goods and merely issued invoice or that he did not contravene a provision relating to evasion of duty. The appellant issued invoices without delivery of goods with intent to enable evasion of duty to which effect a finding has been recorded and which finding has not been challenged. We are, thus, unable to hold that appellant was not liable to pay any penalty. 20. It is observed that in the present case relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the four appellants namely Ms. Mamta Garg, M/s. Mukesh Garg, Shri Naveen Agarwal and Ms. Aruna Agarwal. It is also necessary to crystalise their role in perpetuating fraud of fraudulent passing of illegal credit on the strength of fake invoices. In this regard I have perused detailed and in depth findings recorded by adjudicating authority. Role of all these appellants is highlighted in para 15, para 16, para 17 and para 18. For easy reference, paras 16.1, 16.2 17.4, 17.5 17.6, 17.10, para 18 (relating to M/s. Techno Engineers, M/s. SRG Machines, M/s. Ajanata Enterprises, M/s. HSN, Engineering) are reproduced. Para 16.1 It is to mention that M/s. Minda HUF Limited, Noida engaged in the manufacture of automobile lockers, falling under chapter 87 of CETA, 1985, were availing facility of Cenvat Credit of duty paid on various inputs and capital goods. They were obtaining these inputs and capital goods on regular basis from various suppliers as per their need and were availing Cenvat credit of duty amount involved on such items. Para 16.2 During the course of inquiry, it came to notice that some firms are issuing Cenvatable invoices for various inputs needed by MHL but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am inclined to conclude that these firms were not having any facility to manufacture goods shown as supplied to MHIL, of which they have availed Cenvat credit. Para 17.5 Some suppliers were not registered with the department. I find that the most of the above said firms were issuing central excise invoices without obtaining proper registration from the central Excise department as mentioned in first part of notice. Instead, they used fake registration number in the Cenvatable invoices. Para 17.6 Non-receipt of the goods at the premises of MHL I find that as these suppliers were not having needed manufacturing facility and in most of the cases they were not registered with the department, it was concluded that MHL was using invoices issued by these non existent/fake firms to avail irregular Cenvat credit, I find that non-receipt of goods at MHL has been admitted by various key persons of MHL who were incharge for receipt of the goods, making entry thereof in the gate record, generation of internal record, payment, transportation of the goods, etc. I find that this observation made because of various statements of key functionaries is correct and forcefully depicts the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; The units found located in the given address was engaged in the manufacture of steel wire [by using wire rod mostly received from SAIL]. Shri Mukesh Garg, proprietor of the unit stated that this firm is engaged in manufacture of steel wire, wire products and fabrication of steel parts. He stated that the items shown consigned to MHL were made as per drawing supplied by MHL but he failed to produce any such drawing. However, when the facts stated by him thereof could not be manufactured through fabrication being specialized parts of automobile locks. (iii) M/s. Techno Engineers, Netaji Subahash Nagar, Near Vishal Dharamkanta, Modinagar (Distt. Ghaziabad). (Owner Mrs. Aruna Aggarwal) On verification, no unit in the name and style was found in existence of the given address. This unit, which was engaged in passing of fraudulent cenvat credit was owned by one Smt. Aruna Agarwal resident of Netaji Subhash Nagar, Near Vishal Dharamkanta, Modinagar. No specific address of Mrs. Aruna Agarwal was found. As per details of bank account of M/s. Techno Engineers, it was observed that Smt. Aruna Agarwal is w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the State but destroy the cultural heritage also. Unless nipped in the bud at the earliest, it is likely to cause turbulence shaking of the socio-economic-political system in an otherwise healthy, wealthy, effective and vibrant society and ultimately, such excise duty or the tax evaders can create a parallel economy in the State which may pose a serious threat to the nation. In the present state of affairs, the economic offences are undoubtedly more grave in nature than those offences which are otherwise said to be grave. 25. As regards to imposition of penalty which is quasi criminal in nature considering the tax fraud engineered by the appellants they are no less than evaders causing serious threat to economy and also enriched at the cost of revenue, no imposition of penalty shall send a message to the society that evasion is rewarded with incentive. Judgment of Hon'ble High Court of Punjab & Haryana in the case of V.K. Enterprises as referred in previous paras is also relevant. Therefore, it is justified to uphold the penalties imposed by adjudicating authority in his adjudication order 34/Aayukt/Noida/2008, dated 27-8-2008. 25. Order accordingly. Sd./- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Cenvat Credit Rules 2002/2004. The four appellants involved in the present appeals were imposed with penalties as above on the ground that the evidences brought out during the investigation had established that the appellants either did not have any manufacturing facility for manufacture of the alleged inputs shown to have been sold to M/s. Minda HUF Ltd. or they do not exist in the given address. All the appellants found to have been issued invoices without supplying the goods. This enabled M/s. Minda HUF Ltd. to avail improper Cenvat credit. 29. On appeal, the Member (J) held that since the main noticee, M/s. Minda HUF have approached and have been granted immunity from penalty by the Settlement Commission, the penalties imposed on the appellants, as co-noticees, cannot be sustained. Reliance was placed on the decision of the Tribunal in S.K. Colombowala - 2007 (220) E.L.T. 492 (Tribunal-Mumbai). Accordingly, Member (J) held that the appeals are to be allowed. Member (T) recorded that the appellants issued only paper invoices without actual manufacture and clearance of goods. All these appellants, who are involved in such activities incurred distinct liabilities by thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of the Hon'ble Supreme Court in Union of India v. Onkar S. Kanwar - 2002 (145) E.L.T. 266 (S.C.). 33. I have perused the said decision of the Hon'ble Supreme Court, para-14 of which clearly shows that the Hon'ble Supreme Court was specifically dealing with KVSS Scheme read with 8-12-1998 order of the Government and clarificatory note dated 16-12-1998 :- "14. We have heard the parties. In our view, a reading of the Kar Vivad Samadhan Scheme (Removal of Difficulties) Order shows that where a declaration had been made in respect of a tax arrear and where in respect of the same matter a show cause notice had also been issued to any other person, then the settlement in favour of the declarant has to be deemed to be full and final in respect of other persons on whom show cause notices had been issued. It is settled law that when an appeal is pending there is no finality to the proceedings. The proceedings are then deemed to be continuing. Undoubtedly, at one place the Kar Vivad Samadhan Scheme (Removal of Difficulties) Order seems does state that the show cause notice should be pending adjudication. However, the same order also talks of the show cause notice being in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings under Customs Act or any other Act for assessment and collection of customs duty. 34. First of all, the reliance placed by the Tribunal in S.K. Colombowala (supra) on the decision of the Hon'ble Supreme Court in Onkar S. Kanwar (supra) is not appropriate as the issue dealt with is different in scope and application. The same is very clear from the findings of the Hon'ble Supreme Court reproduced above. Even otherwise, the term "co-noticee" cannot be interpreted in such a manner that all the persons, who received same show cause notice in a combined investigation, will automatically deemed to have been involved in one single case only. Such inference will be factually incorrect in many cases. It is not in-frequent that the investigations are conducted against many assessees and other parties in a combined operation involving same or different modus operandi. For convenience, a single show cause notice is issued to various assessees and other connected parties. If one such assessee approached Settlement Commission and settled the case, it does not mean that simply because of that various other assessees involved in the same investigation proceedings and issued with said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evy, assessment and collection of excise duty pending before an Adjudicating Authority on the date, on which application under sub-Section (1) of Section 32E is made. As already noted, that the proceedings against the appellants are for imposing penalties for various contraventions of the provisions of Central Excise Law. It is not for assessment of duty payable by them. In other words, without there being a case of any short payment or non-payment by the main noticee in the present case, a case against the appellant will stand on its own, based on the allegations made. The merit of the allegations are to be decided in these appeals. To say that all the allegations against various parties in a single notice will abate once the main party gets matter settled, is not applicable in cases where there are distinct violations alleged for different noticees, though the investigation may be common. A reference can be made to the decision of the Hon'ble Supreme Court in the case of S.P. Chengalvaraya Naidu v. Jagannath and Others reported as (1994) 1 Supreme Court Cases 1 :- "The principle of "finality of litigation" cannot be pressed to the extent of such an absurdity that it becomes an e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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